Why Angie's List, Inc. Shares Plummeted

Is Angie's List's drop meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Angie's List(NASDAQ:ANGI) plunged more than 17% Thursday after the company reported mixed fourth-quarter results and light forward revenue guidance.

So what: Quarterly revenue rose 49% year over year to $68.8 million, which translated to earnings of $0.05 per share. Analysts, on average, were looking for significantly higher earnings of $0.13 per share on lower sales of $68.5 million.

For the current quarter, Angie's List expects revenue of $71.5 million to $72.5 million, the midpoint of which is also below expectations for Q1 sales of $74.14 million.

Now what: That bottom-line miss was big, but investors need to keep in mind earnings also included a $4 million accrual for pending settlement of litigation. Even without that expense, however, Angie's List still would have missed expectations with earnings of approximately $0.12 per diluted share.

However, that doesn't abate concerns first-quarter revenue is lighter than expected, and the stock doesn't look particularly cheap trading around 18.4 times next year's yet-to-be-revised earnings estimates. That's why for now, while I don't think Angie's List is a broken company, I still prefer to watch from the sidelines.

Author

As a technology and consumer goods specialist for the Fool, Steve looks for responsible businesses that positively shape our lives. Then he invests accordingly. Enjoy his work? Connect with him on Twitter & Facebook so you don't miss a thing.